LOGA Industry Report - Fall 2008 - (Page 13)

From the Pipeline Don’t Mess It Up 10 years ago crude oil was selling below $20./bbl. This week it closed above $140./bbl – an all-time record high that continues to fuel the drilling frenzy taking place all over the United States. It’s been over 20 years since we have seen the U.S. rig count at the level it is today – passing the 1,900 active rig mark last week. Last year over 100 new rigs were added to the total U.S. active rig ﬂeet, theoretically to replace 100 of the older rigs marked for “ofﬁcial” retirement (some for the second and third time). However, with oil prices where they are today, all the rigs have stayed active. An additional 100+ rigs are planned to be added in 2008. Where are the people going to come from to operate these rigs? Who will do the well planning and engineering, and service and maintain the wells? Everyone knows there is a severe shortage of industry personnel – from petroleum engineers to rig hands and service hands. Today’s industry personnel have enjoyed the beneﬁts of being in strong demand once again. Job offers, with amazing salary and beneﬁt packages, are being thrown out to anyone with oilﬁeld experience. This may Just solve each individual company’s shortage of personnel for the short term, but what about the long term? Are we promoting the petroleum industry in a positive way to the new generation entering the job market? Or, are we still proud of our “Oilﬁeld Trash” name and promote it loud and proud? We must encourage the new generation of work force - those graduating from high schools, those returning from military service, those attending technical schools, etc - to give serious consideration to the petroleum industry as a career choice. We are all professionals at what we do within the petroleum industry and we must recognize and promote the petroleum industry in a more positive way. Do you remember the bumper sticker that appeared in the late 1990s – “Please Lord, just one more oil boom. I promise not to mess it up this time.” Well, we now have the opportunity to build the petroleum industry once again with the new generation. Let’s not mess it up. Bill Mahler Wild Well Control, Inc. I Always Wanted to be in the Movies The current frenzy in North Louisiana over the Haynesville Shale Play got me to thinking about the folks lucky enough to be in the movie business. A few years ago the state of Louisiana had enough foresight to provide a movie tax credit to entice those in the movie industry to come to Louisiana and bring with them the economic impact associated with the business. Isn’t it a shame that we don’t apply the same logic to our own oil industry. We in North Louisiana are currently living through a boom in the natural gas industry thanks to the Haynesville Shale. I cannot help but believe that our state’s competitive severance tax of 28.8 cents per MCF is helping to fuel such massive capital investment. But what about our severance tax on crude oil? Here we do not have such an edge. Louisiana collects 12.5 percent tax on crude oil, as compared with 4.6 percent tax in Texas, and 5 percent in Arkansas. The Louisiana severance tax burden, when coupled with a state income tax of 6 percent, puts the producer down 18.5 percent before he begins. With no income tax in Texas, and a severance tax of less than 5 percent, why would anyone want to drill for oil in Louisiana? When crude oil dropped to $10 per barrel in 2000, our company asked ourselves that exact question. The answer was to go to western Texas, where we have drilled over 300 wells in the past eight years. I have tried to convince two governors and various legislators to at least give us a two year exemption on our severance tax, as does the state of Arkansas on new discoveries, but I have gotten nowhere. At a time when many of us are trying to expand our reserves, why not give us some reason to come back and drill in Louisiana? I guess it only works for Hollywood. Michael H. Woods Woods Operating Co., Inc. www.loga.la | 13 http://www.loga.la

Table of Contents Feed for the Digital Edition of LOGA Industry Report - Fall 2008

LOGA Industry Report - Fall 2008 Contents Chairman's Corner President's Perspective Commissioner's Comments From the Pipeline... Supreme Court Upholds Act 312 LOGA Challenges Commission's Ad Valorem Tax Rules The Haynesville Shale - Waiting for the Gas to Come In 2008 Legislative Recap Gulf Coast Prospect Expo 2008 2nd Annual LAGCOE Open Golf Tournament Conservationist by Trade Katrina Relief Fund Update DNR Intent Natural Gas Production Surges: A Free Market At Work IPAA Washington Report Legal Updates New Members Index to Advertisers

LOGA Industry Report - Fall 2008

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